Due to COVID-19 pandemic, employers have taken measures to face the crisis during the last months, such as: -suspensions of employment, – reduction of work shift/salary, – vacation, – dismissals, etc.
Suspension of employment and reduction of work shift/salary have been the most popular options, which are allowed by Labor Code and Law N° 9832 “Authorization of work shift reduction due to the declaration of emergency”. The first option allows the employer and employees to suspend its obligations (i.e. employer will not be obliged to pay salary and employees will not be obliged to work), normally during a month and the second option allows the employer to reduce both, work shift and salary between 50% and 75%, for three months, allowing companies to stay operational and to request for extensions of the term if needed. In order to apply these options, it is necessary the approval by Labor Ministry (MTSS because its acronym in Spanish), however, these measures cannot be applied to pregnant women or on breastfeeding time.
Also, there are companies that have applied stronger actions as dismissals with employer liability based on provision 85 section D) of the Labor Code, due to the economical detriment caused by the pandemic.
Furthermore, to reduce the spread of COVID-19, our authorities have urged letting employees to take vacation or agreeing to take vacation in advance with those employees without accrued days, with the warning that they do not have to expose to the pandemic. Similarly, it has been urged to apply work from home for those positions that could be performed remotely.
Moreover, during the first months of the pandemic, Government through MTSS approved a bonus called Protect Bonus, which granted subsidies for unemployed individuals (approx. US$ 350 dollars) and for individuals with reduced work shift (approx. US$ 125 dollars) for three months, however, it is uncertain if the bonus will remain since there are different criteria between the Government and Congress. Additionally, the Board of Costa Rican Social Security, approved the reduction of the Minimum Base of Contributions, so that lower salaries will pay less taxes related to the insurances of health, disability, old age and death.
Given the foregoing, Costa Rica is trying to implement these measures to face the current context, and we will have to wait to see if these options are enough or if other measures must be applied.
Fernando Farrar – Associate / Andrea Melara – Paralegal
The arrival of COVID-19 has come to change schemes. Many employers have come to consider the closure of their businesses as their only option; however, below, we will develop some measures to help maintain the economic stability of companies.
Suspension of employment agreements by mutual consent, has been an option applied, employers can reach to an agreement with the employee and grant a document through which mutual understanding, the provision of services by the employee, and the payment of wages will stop. How long? this will depend on the suspension period agreed by the parties. (Article 37, ordinal 1st Labor Code).
In this scenario, the employee can choose to enjoy paid annual vacation, as long as it corresponds to this period. The employer is the one who must indicate the time of enjoyment of the vacation and notify the start date of the holiday thirty days in advance. It is essential to keep in mind that in ES, it is not allowed to advance or split vacations. (Articles 182 and 188 Labor Code).
Reduction of wages and working hours is a complicated issue, since salary reductions are expressly prohibited in our legislation (article 30, ordinal 10th Labor Code); however, there is the alternative of modifying individual employment contracts, by mutual agreement and with the formalities of a written contract (including signing in triplicate and depositing with the Ministry of Labor an original, when possible), agreeing to the reduction of the working day and, consequently, the salary to be paid (the proportion of both reductions must be respected: hourly wage must be the same).
Furthermore, currently, dismissals can be made both with and without just cause (articles 50 and 53 Labor Code). However, it is essential to take precautions with certain groups that are covered by the new executive decree 31, issued and published in the Official Gazette on June 14, 2020. According to its article 12, all employees who: are over sixty years old, pregnant women, puerperium and exclusive breastfeeding, people with chronic kidney failure or transplant patients, hypertensive patients, people diagnosed with cancer, chronic, degenerative and immunosuppressive diseases, people with disabilities, chronic lung diseases or morbid obesity are among the “Vulnerable groups,” therefore they cannot be “affected” in the workplace if they choose not to attend their workplace.
Jordi Ruano – Paralegal
Of the sanitary, economic and social crisis of the country, Guatemalan labor law, complemented by temporary government provisions, states and gives life to alternatives that employers and employees can take in order to guarantee the stability and continuity of most jobs.
As a result of the confinement and suspension of non-essential activities and work, it has impacted on employees vacations, which can be notified by the employer, who has the faculty to schedule when these can be enjoyed, and thus decrease this accumulation.
With the vacations measure, the salary reduction and workshift are the ones that have had more boom, materializing by mutual agreements between employers and employees; based on the ius variandi and the presidential dispositions during this state of public calamity.
If the two previous measures were not an option for the company and it is necessary to stop the operation (in whole or in part), it is possible to make a total collective suspension of employment contracts, which will result in the non-provision of services and non-payment. It is important, for this measure is a specific temporary regulation.
As a last measure, we have left the most radical as labor terminations or closure of the company, which would lead to terminate the employment contract, having to pay labor benefits and severance (if applicable), taking into account that there may be employees who enjoy immobility.
Based on provision article 328 of the Labor Code, the working day can be reduced by virtue of an agreement between the parties, making it clear that the change is provisional. However, at no time can the salary be reduced, regardless of the reduction in hours, the reduction of an employee’s salary is a just cause that empowers the worker to terminate the employment contract, without notice and without responsibility for their part according to article 114 of the Labor Code.
The labor terminations in our country under COVID-19 are legal protected in article 111 number 6 of the Labor Code. This article and specific numeral establish that the fortuitous case and force majeure are causes of termination of employment contracts, which is precisely what COVID-19 is. It must be considered that the termination of the employment contract would be the last option for the company, having exhausted the other labor measures such as granting vacation time or the suspension of employment contracts.
Suspension of employment contracts by COVID-19 is another option regulated in article 100, number 2 of the Labor Code. Once the National Health Emergency has ended, the employer must submit a written request for authorization of the suspension of employment contracts in a timely manner to the Ministry of Labor, in accordance with article 61 of the Administrative Procedure Law, among with the requirements already established by the Ministry of Labor within three days.
By virtue of the announcement issued by the Ministry of Labor dated March 26, 2020, employers were authorized to grant vacation days to employees who, by virtue of the National Health Emergency, do not show up to work on their ordinary day. For the above, a written agreement must be signed between the parties, which must be sent via email to the Ministry of Labor at the following address so that they are valid: [email protected]
Finally, the definitive closure of companies or establishments is a cause for termination of employment contracts established in article 111, number 9. To make effective the termination for this reason, the employer must notify this decision to the Ministry of Labor, thirty days before the termination date and also notify employees within the same period.
Regarding salary reductions there are some restrictions in the legislation, and the case of law is not clear enough on this aspect; therefore, in principle, the salary reduction is not a recommendable option. Work shift reductions are feasible, though full salaries should remain in effect.
Another option is the termination of fixed-term contracts that requires the payment of pending vacation days and proportional Christmas bonus (known as “thirteenth month”). An early termination of these contracts entails risks of compensation claims from employees. The termination of permanent contracts requires the payment of the abovementioned benefits plus severance pay.
Suspensions of employment is an option, it may be partial or total, with respect to the contract´s fundamental obligations, or individual or collective, considering the number of employees involved. The individual suspension can be mutually agreed by the employer and employee, or per the employer´s decision only, in case the employee suffers a common disease. A collective suspension could take effect due to the company´s temporary shutdown for technical or economic reasons, or when it is due to a fortuitous event that derives in the necessary, immediate, and direct suspension of work. The collective suspension requires the Ministry of Labor´s approval.
In respect with vacation time, employees are entitled to fifteen days of paid vacations per six months of uninterrupted work for the same employer. If there are pending or accumulated vacation days, employer and employees could agree on taking them; if there are not, then the employer could grant in-advance vacations to employees, considering that those advanced vacations could not be deducted from the employee´s liquidation payment in case of termination.
Finally, companies may temporary close for technical or economic reasons, requiring the Ministry of Labor´s approval and following the corresponding administrative procedure before such Ministry. Permanent closings also require the Ministry of Labor´s approval.